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Best Buy will shift toward mobile-phone sales and smaller stores in an effort to boost sagging revenue. Best Buy's signature big box stores will be dialed back, and 50 will close in 2012, the company said this morning.

The world's largest consumer-electronics retailer will test the new store models in San Antonio, Texas and St. Paul, Minn. The renovation would reduce store square footage by 20%, and should be finished by next Christmas. These new so-called "Connected Stores" will focus on selling cell phones, tablet computers and e-readers, as well as service plans not offered by Amazon and Wal-Mart. Best Buy employees in these new stores are expected to show customers how to connect electronics in the home.

Meanwhile, Best Buy will open another 100 smaller mobile-only stores in fiscal 2013. By 2016, the retailer expects to operate some 600 to 800 mobile-only stores, up from 305 today.

Further the retailer plans to cut $800 million from its budget by fiscal 2015, including some $250 million in the next fiscal year. Much of that will come from changes to its supply chain and domestic retail stores. But the final $200 million will involve cutting 400 corporate jobs.

"We intend to invest some of these cost savings into offering new and improved customer experiences and competitive prices --- which will help drive revenue," CEO Brian Dunn says in a statement. "And, over time, we expect some of the savings will fall to the bottom line."

Best Buy shares plunged as much as 8% during today's trading. The stock closed down nearly 7% at $24.76.

Best Buy is locked in a tight race for customers. It must battle both big box rivals, such as Wal-Mart and Target, and younger Web retailers—those from the Amazon.com and eBay generation. Its mammoth stores have essentially become labyrinthine showrooms: Customers go to to see a product, and can quickly use a smartphone to find a cheaper price online. This has led to six straight quarterly declines at stores open at least 14 months, including a 2.4% dip in same-store sales last quarter.

"They just seem to be fighting a losing battle," says Brian Sozzi, NBG Productions chief equities analyst. "Ten years down the line, I don’t know what they’re going to look. Or if they’re even going to be around. Because this could be snowball."

Critics say there's a burial plot already dug for Best Buy. And it's right next to Circuit City. In 2009, Circuit City, then the second largest consumer-electronics chain, collapsed after failed innovation attempts. "What differentiates Best Buy from Circuit City? They’re the same company wrapped in different colors," Sozzi says.

Wall Street seems to agree. Since Circuit City's liquidation in January 2009, Best Buy shares have dropped 7.8%, wiping out about $3 billion in market cap. In that time, the S&P 500 index is up 60.8%.